WPC480 Lacey Questions With Complete
Solutions
A firm pursuing sustainable competitive advantage uses strategic positioning for what purpose?
To try to avoid direct competition.
How can you identify that a firm seeking a strong strategic position has been making
strategically helpful tradeoffs? The firm does not pursue some market opportunities.
T/F Most of the statistical variance in profitability is due to differences at the level of the firm;
the differences across industries only explains about half as much of the variance in firm
profitability. T
T/F A black swan event refers to an entirely unpredictable occurrence that has a big impact.
T
T/F The best way to measure strategic competitive advantages is by shareholder value creation.
F
, WPC480 Lacey Questions With Complete
Solutions
T/F It says in the textbook that the "three [main] performance dimensions tend to be correlated,
particularly over time" because each element affects the other. Given the correlation between the
three, it won't matter much which one is used to evaluate competitive advantage. F
T/F The higher proportion of assets that are tangible, the more accurate accounting profit as a
measure of competitive advantage. T
T/F A major difficulty in using the economic value approach to measuring competitive advantage
is estimating the counterfactual of what people would have been willing to pay. T
Which of the following ways of measuring and evaluating competitive advantage of a firm are
most likely to be the focus of the CEO of a public firm? Shareholder Value
"Halo Effect": CEO of a successful firm has proven skills at making a firm successful.
High performance of the firm forms a "halo" that is reflected onto the CEO's reputation
and causes people to believe the CEO cause the firm's performance.
, WPC480 Lacey Questions With Complete
Solutions
"Halo Effect": Theories can be created about how to achieve high firm performance that are
equally accurate and useful in all contexts. Managerial theories help understand better
how to sort important from unimportant data to make better decisions.
"Halo Effect": A firm that makes huge profits is a success. The successfulness of firm
performance is always defined relative to competitors and/or opportunity costs.
"Halo Effect": Managers can best learn by studying successful firms. It is easy to be
misled when studying complex subjects if you don't study both successful and unsuccessful
cases.
Porter's Five Force 1. Bargaining power of customer
2. Bargaining power of supplier
3. Threat of new entry
4. Threat of substitute
5. Competitor rivalry
PESTEL Analysis - Political: non-market strategy
, WPC480 Lacey Questions With Complete
Solutions
- Economic: macro-economic condition of a country or a region
- Sociocultual: cultures, norms, & values
- Technological: application of new knowledge
- Environmental: nature
- Legal: governing laws, mandates, & regulations
What is the value to a strategic analyst of doing a PESTEL analysis? Identifies stable
"rules" of the competitive game.
What does a five forces (or industry structure) analysis help a strategic analyst discover?
Who gets the profits produced by the industry members.
An industry has a new technological change that lowers the overall price of producing its
products by as much as 40% and this has led to very high profits in the short term for everyone in
the industry. In the longer term, what are likely to happen to the industry structure? -
Bargaining power of suppliers will not be affected.
- Bargaining power of buyers will decrease.
- Threat of substitutes will decrease.
- Rivalry among competitors will increase.
Solutions
A firm pursuing sustainable competitive advantage uses strategic positioning for what purpose?
To try to avoid direct competition.
How can you identify that a firm seeking a strong strategic position has been making
strategically helpful tradeoffs? The firm does not pursue some market opportunities.
T/F Most of the statistical variance in profitability is due to differences at the level of the firm;
the differences across industries only explains about half as much of the variance in firm
profitability. T
T/F A black swan event refers to an entirely unpredictable occurrence that has a big impact.
T
T/F The best way to measure strategic competitive advantages is by shareholder value creation.
F
, WPC480 Lacey Questions With Complete
Solutions
T/F It says in the textbook that the "three [main] performance dimensions tend to be correlated,
particularly over time" because each element affects the other. Given the correlation between the
three, it won't matter much which one is used to evaluate competitive advantage. F
T/F The higher proportion of assets that are tangible, the more accurate accounting profit as a
measure of competitive advantage. T
T/F A major difficulty in using the economic value approach to measuring competitive advantage
is estimating the counterfactual of what people would have been willing to pay. T
Which of the following ways of measuring and evaluating competitive advantage of a firm are
most likely to be the focus of the CEO of a public firm? Shareholder Value
"Halo Effect": CEO of a successful firm has proven skills at making a firm successful.
High performance of the firm forms a "halo" that is reflected onto the CEO's reputation
and causes people to believe the CEO cause the firm's performance.
, WPC480 Lacey Questions With Complete
Solutions
"Halo Effect": Theories can be created about how to achieve high firm performance that are
equally accurate and useful in all contexts. Managerial theories help understand better
how to sort important from unimportant data to make better decisions.
"Halo Effect": A firm that makes huge profits is a success. The successfulness of firm
performance is always defined relative to competitors and/or opportunity costs.
"Halo Effect": Managers can best learn by studying successful firms. It is easy to be
misled when studying complex subjects if you don't study both successful and unsuccessful
cases.
Porter's Five Force 1. Bargaining power of customer
2. Bargaining power of supplier
3. Threat of new entry
4. Threat of substitute
5. Competitor rivalry
PESTEL Analysis - Political: non-market strategy
, WPC480 Lacey Questions With Complete
Solutions
- Economic: macro-economic condition of a country or a region
- Sociocultual: cultures, norms, & values
- Technological: application of new knowledge
- Environmental: nature
- Legal: governing laws, mandates, & regulations
What is the value to a strategic analyst of doing a PESTEL analysis? Identifies stable
"rules" of the competitive game.
What does a five forces (or industry structure) analysis help a strategic analyst discover?
Who gets the profits produced by the industry members.
An industry has a new technological change that lowers the overall price of producing its
products by as much as 40% and this has led to very high profits in the short term for everyone in
the industry. In the longer term, what are likely to happen to the industry structure? -
Bargaining power of suppliers will not be affected.
- Bargaining power of buyers will decrease.
- Threat of substitutes will decrease.
- Rivalry among competitors will increase.
